The study explores how power relationships between large-block shareholders and professional managers affect performance in public corporations. Certain types of shareholders with large ownership stakes are hypothesized to have formal authority, social influence and expertise that enables them to control public corporations, resulting in superior corporate performance. This idea is tested in a study of the U.S. textile industry from 1983-1992, an industry characterized by "transparent" economic conditions and strong social relationships between owners and managers, observed during a highly turbulent time period. Pooled, cross-sectional time series models indicate that controlling for ownership concentration, public corporations with outside-director owners, sustained owners and family owners each enjoy increased firm performance relative to industry competitors. These results suggest that large-block owners are not homogenous and that certain types of owners have a disproportionately large amount of influence in corporate governance. This paper proposes a parsimonious theory of national institutional factors that promote or inhibit the organizational constraints facing incumbent firms in the US and Japan. Three specific factors are analyzed: the technical labor market, the venture capital market, and the structure of buyer-supplier ties. Complementarities between these factors cause them to work as a system. Differences in these factors elevate or reduce the level of incentive constraints and appropriability constraints acting on incumbent and startup firms respectively. As a result, incumbents might be displaced in an industry in one country, while incumbent firms in the same industry in another country might preserve, due to the presence or absence of startup firms. This suggests that there may be no single best way to organize for innovation in different institutional settings; rather, firms must seek to exploit the virtues of their environment, even as they act to mitigate the hazards posed by that environment.